Challenges: Internal and external

The economy and competition top the list of challenges that US family businesses say face them now and in the future. They know that business as usual won’t suffice if they are to maintain — and grow — market share despite these challenges. To differentiate themselves, family firms will need to create new products and services, improve current offerings, and find new ways of engaging with customers — or even adopt an entirely new business model. Innovative leaders and a strong talent base will be essential to achieving these goals, which may be why innovation and talent also rank among the top challenges family businesses flagged in our survey.

US family businesses — Top challenges now and in five years

Expansion: Seek new horizons

To sustain growth in today's challenging economy, roughly half of US family businesses are selling abroad. The trend appears likely to continue: The percentage of surveyed businesses anticipating international sales five years from now is nearly double what it was two years ago ― 54% vs 30%. With new opportunities abroad, however, come new challenges, which companies will have to negotiate effectively if they are to succeed.

US family businesses — International expansion

Innovation: Think a new way

The majority of US family businesses rank the need to continually innovate as their top challenge over the long term. One-third of them worry that having family members in key positions could make their companies less open to new thinking. That said, 69% of survey participants feel that family businesses tend to be more entrepreneurial than other types of companies. The key to propelling their businesses forward is to achieve the right mix of new ideas and pioneering spirit.

US family businesses — Innovation imperative

Succession: Make or Break

Is keeping the business in the family the best way to fulfil the founder's dreams? Seventy-six percent of US family business leaders think yes. However, only 52% of them expect that members of the next generation can do it on their own ― 24% plan to enlist outside management to run the company when ownership passes to junior members. Uncertainty about whether junior members will have the aptitude for running a company is the leading concern that family businesses have about keeping management in-house.

Many, but not all, US family businesses plan to keep things in the family

Quotes

Tom Traylor

Vice president and chief development officer
Traylor Bros., Inc

The biggest thing I have seen over 20 years in the business is that owners, if they work together, can create synergies more powerful than those in non-family businesses. Having multiple owners with their eyes on the ball in different directions enables them to grow faster and perform at a higher level.

Jamie Trowbridge

President and CEO
Yankee Publishing, Inc.

Being privately owned allows us to plan long term and provides stability in ownership.

Robert Simon

CFO
Contractors Steel Company

Family businesses are closely knit and have the ability to change direction rapidly.

William Elliott

President
Elliott Electric Supply, Inc.

Typically, succession issues pose problems — having family members who are capable of running the business and managing the transition from one generation to the next.

Bharat Agrawal

Director and founder
The Dotcom.Team, LLC

A key way that government could help family businesses is to create the right skills at the education level and make education more science driven.

William Elliott

President
Elliott Electric Supply, Inc.

The biggest challenge for us is to match growth to capital, so we need to grow the business in order to use up the capital being generated by the company.

Joe Sheetz

Executive Vice President
Sheetz, Inc.

We’re constantly looking for the next big thing. It’s like changing the tire on your car without stopping. Some might call that exhausting. For us, it’s energizing.

Joe Sheetz

Executive Vice President
Sheetz, Inc.

When it comes to technology, sometimes we’re an early adopter, but for a lot of things we’re a fast second mover. We’d rather have somebody else prove that the technology works. Once that happens, we jump in pretty quickly.

Chris McCormick

CEO
L.L. Bean

A family-held business is seen as being around for a long time. To be around for another 100 years, we have to invest in the future, take chances. The family understands that.

Chris McCormick

CEO
L.L. Bean

Because we’re a privately held company, we can take a long-term approach to growth initiatives. We don’t play to the Street or to the quarterly results cycle. In fact, in 2010 we went to the board and recommended that L.L. Bean have an investment year and allow profits to fall. We needed to make a big investment in marketing and in attracting younger customers, and the board agreed.

Gilbert Cohen

CEO
Cohen’s Clothiers

Family businesses have a tendency not to look for talent outside the family. This limits their exposure to fresh thinking and makes them less willing to embrace new ideas.